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What Investors Should Expect for the 2nd Half of 2016

published: May. 12, 2016

PARSIPPANY, N.J., May 12, 2016 /PRNewswire/ — Hennion & Walsh, has released their Summer 2016 Market Outlook with insights on what investors should expect for the 2nd half of 2016 (link here). While 2016 may look a lot like 2015 in terms of stock market returns in the U.S., intermittent periods of stock market volatility, endless debates over potential Federal Reserve interest rake hikes and overseas economic uncertainty, Hennion & Walsh believes that there will be some unique tests in 2016 that were not present in 2015 and areas of previous market leadership will continue to change and evolve into new areas of market leadership.

“Interest rates worldwide should remain at historically low levels for the foreseeable future resulting in the need for investors to continue to look for attractive yield-based alternatives” said Kevin Mahn, Chief Investment Officer at Hennion & Walsh Asset Management. “We currently believe that there are five areas that will influence market performance for the remainder of 2016:”

• Housing: There are not currently any substantial risks to the downside for the housing market and housing statistics should continue to paint a positive outlook for the housing market over the short-intermediate term as the U.S. economy continues to stabilize and the Fed continues to progress upon a gradual, longer term tightening cycle. • Employment: While the ongoing, declining trend in unemployment is encouraging, the labor force rate of participation, which is defined as those individuals over the age of 16 who are working or actively looking for work, still remains as somewhat of a concern for us in terms of economic growth stability. • Global Economic Growth: The European economy, which is still at the beginning stages of their economic recovery and also is not knocking the cover off the ball by any means, has shown signs of life which we believe will be further intensified by additional stimulus measures on the part of Mario Draghi and the European Central Bank (ECB) in 2016, likely involving some form of interest rate cuts or quantitative easing increases. • Energy: Given the forward-looking optimism that many have for the energy sector, regardless of whether or not oil prices will continue to move higher or not over the short term, the rising domestic and international demand for clean burning fossil fuels, and the innovative fracking capabilities that exist on the North American continent, we believe that it is now time to consider investment strategies associated within the energy sector, diversified across oil, natural gas and other alternative sources of energy while trying to incorporate different components across the energy supply chain. • Interest Rates: Instead of just considering raising rates further after each FOMC meeting, the Fed may consider some form of a gradual 1-2 punch of rate increases and sales of U.S. treasuries (or non-investment of the principal of existing maturing bonds) off of their balance sheet, though not necessarily after each FOMC meeting.

Finally, the volatility within the equities market that took place in 2015, and continued during the 1st quarter of 2016, may continue to serve as a form of a detour for the great rotational shift from bonds to equities that many forecasted would take place once the Federal Reserve began to raise interest rates.

“..Mounting inflationary pressures and improvements in U.S. economic fundamentals may force the Fed to hike again sooner (and/or perhaps more frequently) than most are currently expecting in 2016.” (Page 1)

“With respect to municipal bonds, we believe that the combination of additional equity market volatility, a less hawkish Federal Reserve and an overall decline in municipal bond issuance will continue to drive the demand for municipal bonds and municipal bond-orientated investment strategies in the months ahead.” (Page 3)

“…2016 may ultimately be the year when international developed market returns surpass those of the U.S. (in USD terms).” (Page 20)

“Investors should be careful not to miss out on the income and diversification opportunities offered by bonds by trying to time future, potential changes in interest rates.”(Page 21)

About Hennion & Walsh Hennion & Walsh, a full service brokerage firm specializing in municipal bonds, was founded in 1990 by Richard Hennion and Bill Walsh. Their mission is to be the individual investor’s fiercest and most passionate advocate. Investment guides, webinars, seminars and online content are just some of the ways they help investors become better informed and make better investment decisions. The firm has built its reputation on developing strong, mutually beneficial relationships designed to last a lifetime, serving over 16,000 clients with brokerage accounts and managed portfolios. They are committed to providing individual investors with the institutional-quality service and guidance they believe they are entitled to. Additional information on Hennion & Walsh is available at www.hennionandwalsh.com. Hennion & Walsh is a member of FINRA and SIPC..